Eighty years later, the Tsarist bond pays off

Old bonds can turn out to be a lot more than a nice bit of engraving to paper the loo with.

About 400,000 French investors still hold some four million bonds issued by Tsarist Russia, with a nominal value of around pounds 1.7bn. They have had no payments on their holdings since 1917. Now a settlement is thought to be imminent.

The announcement has already had an impact in Bond Street. Russian bonds consigned to Phillips' auction sale on 13 February have already been withdrawn by their vendors.

Scripophily, the rather unwieldy name given to the collecting of old bonds and share certificates, is where the worlds of finance and collecting meet. The International Bond and Share Society has 680 members in 45 countries, holds regular meetings, publishes an illustrated journal four times a year and issues an annual directory of dealers, auction houses and collectors.

The story of scripophily began in the 1970s when dishonoured bonds from Russia, China and South America were trading on the London Stock Market for peanuts - typically for 25 to 50p per pounds l00 nominal value.

Some flamboyant brokers had their toilets papered with certificates because they were more interesting and cheaper than conventional wallpaper. A very small group then began to accumulate them because of their aesthetic appeal. Certainly many are colourful and the standard of engraving is superb and there was always a remote chance that one day they would be redeemed.

Then Stanley Gibbons, the stamp dealers in the Strand, began dealing in coins and added bonds, old cheques, antique maps, campaign medals and antiquities to its repertoire.

Articles on the virtues of investing in collectables appeared in the general and financial press, a couple of books appeared on the subject and a specialist magazine at pounds l0 an issue was published. Investment advisers Towry Law even launched a collectable portfolio in conjunction with Gibbons.

The glossy brochure did warn that there was a risk in such investment, but the section on bonds concluded that "there are indications that bonds are due for an increase in value".

There certainly was. Mike Vessid from Shrewsbury, who has dealt in old bonds for 20 years, recalls those heady days. "In late November 1978 I bought a pounds 1,000 bond issued by the Chinese government in 1919 to finance the import of Marconi equipment. I paid pounds 75 and 11 months later the same bond was changing hands for over pounds 4,000. Today it would be worth around pounds 300."

A pounds 500 bond issued by the Russian Kokhand-Namangan Railway in 1910 was selling for pounds 25-pounds 30 in 1978 and by the end of 1979 was selling for around pounds 2,000. Today, an example will sell for around pounds 350, while a pounds 20 bond of the same issue will sell for its nominal value.

Inevitably the bubble burst, the downward price spiral lasting a few months. In 1982 Gibbons began the task of selling its vast stock of international bonds. Bonds which had been retailing for pounds l50 each were sold in bulk over a three-year period for pounds 2-pounds 3 each to Continental dealers.

In 1986 an agreement was signed to allow deposits worth pounds 46m made by the imperial Russian government, frozen in Britain since 1917, to be used to settle claims by British nationals against Russia. But of the estimated 10-20 million in existence, only one million bonds were submitted, and between November 1987 and May 1990 bondholders who surrendered their bonds received three payments amounting to 54.78p in the pound against an initial estimate of 10p.

In 1987, the People's Republic of China partially settled outstanding claims by UK holders of Chinese bonds. It was initially thought that the pounds 20m made available would give holders a 5-8 per cent payout. However, as in the case of Russian bonds, the volume submitted was much smaller than anticipated and holders received 62.5p in the pound.

In both settlements bondholders mostly received more in settlement than their bonds were worth on the collectors' market, though there were exceptions. Defunct bonds and share certificates from the rest of the world plodded along by comparison and continue to do so. While a few classics can sell for thousands - for example a really good 19th-century certificate for Standard Oil signed by JD Rockefeller could sell for up to pounds 6,000 today against a price of pounds 100 in 1978 - thousands of others sell for quite modest sums.

Indeed, prices start from below pounds 10. It is only the rarities which command sums above pounds 100. Some scripophilists adopt a thematic approach, such as gold mines world-wide, while others will restrict themselves to certificates issued in a particular countryn